Japan's January manufacturing activity hits highest in almost four years: flash PMI

Reuters Staff

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TOKYO, (Reuters) - Japanese manufacturing activity expanded at the fastest pace in almost four years in January, a survey showed on Wednesday, with solid output and employment levels pointing to a bright outlook for an economy that continues to grow at a healthy clip.

The Flash Markit/Nikkei Japan Manufacturing Purchasing Managers Index (PMI) rose to a seasonally adjusted 54.4 in January from a final 54.0 in December.

The index remained above the 50 threshold that separates contraction from expansion for the 17th consecutive month and reached the highest level since February 2014.

“The strongest reading in the PMI since February 2014 was supported by quickened rates of output and employment growth,” said Joe Hayes, Economist at IHS Markit, which compiles the survey.

The output component of the PMI index rose to a preliminary 54.7 from 54.5 in the previous month to also reach a peak not seen since February 2014.

The employment reading was at its highest in two months, while the index for output prices rose to a preliminary 52.0 from 51.0 in December, the best level since October 2008.

The PMI index for output prices suggests government data measuring consumer prices may start to accelerate, a welcome sign for the Bank of Japan in its quest to achieve its 2 percent inflation target.

Japan’s economy has been in rude health over the past year, thanks in part to an exports revival amid solid global demand.

Gross domestic product has expanded for the past seven quarters, the strongest run of growth in a decade. The output gap shows demand exceeds supply by the most in more than nine years. Stock prices are at their highest in 26 years, and corporate profits are near an all-time high.

Business investment is rising, exports are growing and the labor market is the tightest in decades, due partly to a shrinking population.